Here's Why Ollie's Bargain (OLLI) is a Smart Investment Choice
Ollie's Bargain Outlet Holdings, Inc. OLLI has not only navigated through market challenges but also demonstrated remarkable resilience and growth potential. Based in Harrisburg, PA, the company has defied industry trends, with its stock rallying by an impressive 61.8% year to date against the industry's 22.3% decline.
The cornerstone of Ollie's success lies in its 'buy cheap, sell cheap' business model, underpinned by prudent cost management and a relentless focus on enhancing store efficiency. The expansion of its customer loyalty program, Ollie's Army, further bolsters its competitive edge.
With the Zacks Consensus Estimate predicting a robust 19.6% increase in current fiscal-year sales and an impressive 67.3% surge in earnings compared to the previous year, Ollie's Bargain is poised for exceptional growth. These figures underscore the company's inherent potential and promising outlook.
Market Expansion Initiatives
Ollie's Bargain's unwavering commitment to offering value-driven merchandise assortments has positioned it as a formidable player in the marketplace, allowing it to effectively respond to consumer demand. The continued success of Ollie's Army has played a vital role in driving sales. With a consistently growing membership, Ollie's Bargain ended the second quarter of fiscal 2023 with 13.5 million active Ollie's Army members, which accounted for slightly more than 80% of sales.
The company's performance has been bolstered by the favorable response to its deals and product offerings, which resonate with a wide customer base. Ollie's Bargain's ability to offer appealing and diverse products has been a key driver of its success. Additionally, the company's strong vendor relationships have played a crucial role in further cementing its position in the market.
Markedly, Ollie's Bargain's results hinge on the availability of brand-name and closeout merchandise at compelling price points. The company remains steadfast in its commitment to delivering superior deals, enhancing operating margins and expanding its store network. Ollie's Bargain stands to benefit from a favorable closeout environment and increased trade-down activity, aligning with its growth objectives.
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Store Growth Strategy
Ollie's Bargain remains committed to its long-term expansion strategy, aiming to have 1,050 stores or more, with an annual target of opening 50-55 new stores. The company has consistently expanded its store network, achieving an impressive CAGR of 11.5%, growing from 303 stores in fiscal 2018 to 468 stores in fiscal 2022. In the preceding two fiscal years, Ollie's Bargain opened 40 and 46 stores, respectively.
Looking at fiscal 2023, the company plans to open 45 new stores, offset by one closure, and remodel 30 to 40 stores. Management's strategy for the year includes the opening of 23 new stores in the third quarter. Importantly, Ollie's Bargain's new store real estate model prioritizes flexibility and focuses on the store size between 25,000 to 35,000 square feet. The company targets new store sales of about $4 million in the first full year of operations.
Final Touch
Ollie's Bargain’s strategic endeavors position the stock firmly for growth. With promising factors such as enhanced closeout opportunities, a growing trend of consumers trading down and ample room for expanding its store network, this Zacks Rank #2 (Buy) stock appears poised for a bright future.
Management has set ambitious targets for fiscal 2023, with net sales projected between $2.076 billion and $2.091 billion, marking a significant increase compared to the $1.827 billion reported in fiscal 2022. Ollie's Bargain also anticipates a robust improvement in comparable store sales in the range of 4-4.5%, a noteworthy turnaround from the 3% decline reported in the previous fiscal year.
Furthermore, the company foresees fiscal 2023 adjusted earnings in the range of $2.65-$2.74 per share, demonstrating substantial growth compared to the adjusted earnings of $1.62 reported in the preceding fiscal period. These promising outlooks underscore Ollie's Bargain's potential for dynamic growth and value creation.
3 More Stocks Looking Hot
Here, we have highlighted some other top-ranked stocks, namely Grocery Outlet GO, Ross Stores ROST and Walmart WMT.
Grocery Outlet, the extreme value retailer of quality, name-brand consumables and fresh products, currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Grocery Outlet’s current financial-year sales and earnings suggests growth of 11.2% and 4.9%, respectively, from the year-ago reported numbers. GO has a trailing four-quarter earnings surprise of 14.3%, on average.
Ross Stores, which operates off-price retail apparel and home fashion stores, currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Ross Stores’ current financial-year sales and earnings indicates growth of 8.1% and 19.4%, respectively, from the year-ago reported numbers. ROST has a trailing four-quarter earnings surprise of 11.4%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Walmart’s current financial-year sales and earnings implies growth of 9.2% and 2.2%, respectively, from the year-ago reported numbers. WMT has a trailing four-quarter earnings surprise of 11.6%, on average.
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Grocery Outlet Holding Corp. (GO) : Free Stock Analysis Report
